Fight emerges over fate of Megaupload U.S. servers

By IBT Staff Reporter On 04/13/12 AT 4:16 PM

A U.S. judge on Friday came up short trying to find anyone to take possession of more than 1,100 computer servers that were used by Megaupload, the now-shuttered online service that has been charged with massive copyright infringement.

Megaupload has offered to buy the servers from the hosting company, but U.S. prosecutors and others have objected because of concerns over ensuring that the copyrighted movies, television shows and music are not downloaded again.

Lawyers for Megaupload and its executives have said that they want the 1,103 servers preserved and want to mine them to try to find material that could exonerate their clients, who are also fighting extradition from New Zealand and the Netherlands.

Prosecutors do not want to take the servers because they have already copied the evidence they say they need for the criminal case against Megaupload and its executives.

The owner of the servers, Carpathia Hosting Inc, wants to either delete the data and re-use it, sell it, or have someone else bear the cost of storing the idle machines.

During an hour-long hearing, U.S. District Judge Liam O'Grady ordered prosecutors and lawyers for Megaupload, the Motion Picture Association of America (MPAA), Carpathia and others to meet to try to find a resolution within two weeks.

O'Grady tried to poll a couple of the lawyers who appeared before him on whether they were willing to take the Megaupload servers, prompting laughter from the audience in the crowded courtroom at the futile effort.

Your parties aren't interested in taking possession of the servers? O'Grady asked a lawyer for a group that has filed a civil lawsuit against Megaupload for copyright infringement. The lawyer declined, as did an attorney for MPAA when asked.

Megaupload, its founder Kim Dotcom and its executives have been charged in one of the largest Internet piracy cases ever brought by prosecutors, who have accused them of flaunting U.S. laws by infringing copyrighted music, movies and TV shows.

The company has countered that it was simply an online storage facility and thus not responsible for the content or what users did with it. The company's financial assets have been frozen and its website shuttered.

I'm not sure we're ever going to have a trial, said O'Grady, apparently referring to the uncertainty over whether the defendants can be successfully extradited to the United States.

A lawyer for Megaupload, Ira Rothken, pleaded with O'Grady to prevent the data, some 25 million gigabytes, from being deleted and said the company has pledged to use it only for defending the company and executives.

There's no way to unring the bell if this data is lost, said Rothken, who had recommended the judge order the parties to try again to reach a compromise.

Carpathia's lawyer, Marc Zwillinger, said the company had disconnected the servers and moved them to a climate-controlled storage facility in Harrisonburg, Virginia, costing $37,000 a month.

He argued that it was unfair to force the company to bear that cost and said the outside parties all wanted prosecutors to take the servers, but that the government had refused.

The lead federal prosecutor on the case against Megaupload, Jay Prabhu, said that forcing the government to take the servers was a massive burden on the government and the taxpayer.

An added complication to the case has been requests made by some subscribers to Megaupload who had used the service as an online storage facility and have asked that their material be returned.

I know of nothing exactly like this previously, but I do expect that with the era of cloud technology opening up and accelerating now, we're going to get disputes like this more and more often, said Paul Rothstein, a law professor at Georgetown University Law School in Washington.

There were also questions about what prosecutors would do because of concerns about possible child pornography contraband on the servers, but Prabhu told O'Grady that they were not asking permission to go back through them and examine the data.

The case is USA v. Kim Dotcom, et al, in U.S. District Court for the Eastern District of Virginia, No. 12-cr-3.